The Global Antitrust Economics Conference - 2018

This third edition of the Global Antitrust Economics Conference was organized by Concurrences Review in collaboration with New York University Stern School of Business, in partnership with Axinn, Bates White, the Brattle Group, CRA, Cornerstone Research, Orrick, Qualcomm, and White & Case.

Opening Keynote Speech

Luke Froeb

In his opening statement, LUKE FROEB (Chief Economist, Antitrust
Division – US Department of Justice) drew attention to the
increasing complexity and importance of economic models and
economic analysis in antitrust cases. The quality of case handling
depends on antitrust lawyers being cognizant in economics so as to
challenge the economists’ analysis with a view to improving their
presentations and reports. It is thus crucial to teach lawyers to use
and master economic tools in order to treat the evidence. Mr. Froeb
addressed the counter-factual questions raised by antitrust on effects
and consumer harm. The core difficulty is to draw inference about
an unobserved state of the market. Explaining possible solutions, he
referred to empirical metaphors from natural experiment and theoretical
models to predict market counter-factual and cited two examples in antitrust and merger control. He explained the functioning of the
website Competition Toolbox, which can help lawyers better understand
economic models. The challenge is to provide a mapping from
the evidence of a case to an opinion. These tools are teaching and
learning tools. Models can allow to determine “what matters, why it
matters and how much it matters”. For example, in merger control,
the closeness of the merging parties, the mode of competition (price,
quantity, bidding), the competition on the market and the anticipated
loss of competition after the merger are important factors. Mr. Froeb
presented these tools as a possibility to make the economic analysis
more transparent, concluding that the aim is better advocacy in
antitrust cases.

PANEL 1

INSTITUTIONAL SHAREHOLDINGS: IS THERE REALLY AN ANTITRUST ISSUE?

FRÉDÉRIC JENNY (Chair, OECD Competition Committee)
chaired the first panel, which focused on antitrust issues raised
by institutional shareholding. He observed that the research on
the impact of institutional shareholding on the competitive situation of a
relevant market has been controversial. Institutional shareholders may
have shares in several competitors. There are empirical and theoretical
foundations for competitive concerns. The principal theories of harm
identified concern unilateral effects – where management would internalize
the fact that their shareholders also have shares in other competitors
and therefore be less competitively aggressive – and coordinated
effects, i.e. an increase in the possibility of collusion. If these theories of
harm can be supported by evidence, the next questions relate to the use
of current antitrust rules and the potential new instruments which could
be added to the “toolbox” to solve this issue.

NATHAN MILLER (Assistant Professor, Georgetown University) noted
firstly that empirical research on common ownership is at an early stage,
and secondly that some econometric challenges make it hard to draw
statistical inferences about the impact of common ownership for economic
outcomes. Relying on two recently published research papers –regarding
notably the airlines industry and the cereal industry –, he discussed the
consequence of an increase in MHHI on price and emphasized the difficulties
linked to empirical data analysis. The interpretation of regression
is not simple due to misspecification. Among the econometric challenges
identified, the timing of effect is hard to grasp due to continuous increase
of common ownership over time. It is important to note that not all empirical
analyses use regression: some researchers have referred to the evidence
that institutional investors, even when they are passive, tend to use their
influence to advance their own interests for e.g. by voting against tough
competition. Mr. Miller considered that both quantitated and qualitative
evidence are important. Finally, if action is taken to address common
ownership, it will best be motivated on theoretical considerations and
qualitative evidence.

GLEN WEYL (Visiting Senior Research Scholar, Yale University)
acknowledged that theory, rather than empirical evidence, is the main
factor. Common ownership could represent a problem for competition if
institutional investors have the incentive and ability to influence, as this
combination is close to sufficient regarding the theories of harm considered
from an economic point of view. Opposing arguments are based on various
theories, for e.g. that companies are run solely by management and
investors have very little or no control in governing corporations, or that
investors do monitor management but choose to encourage competition.
These theories seem to be weak. It is of primary importance for the DOJ
to determine the workings of the economy and whether the impact of
common ownership is destructive to competition.

ERIC GRANNON (Partner, White & Case) focused on the existing
features of current antitrust law which can be used as safeguards against
potential anticompetitive conduct, assuming that common ownership
could pose a potential problem for competition. Section 1 of the Sherman
Act is an important threshold. If a common investor of two competitors
attempts to use their ownership to facilitate an anticompetitive agreement
between these companies, such conduct will fall under the scope of the Sherman Act. A second safeguard is Section 8 of the Clayton Act which
prohibits common management in competing companies. Under the
Hart-Scott-Rodino (HSR) Act, U.S. regulators can use pre-merger review
effectively: unlike the European Commission, U.S. antitrust laws require
antitrust agencies to review acquisitions for minority stakes in the most
significant companies. There is a narrow HSR reporting exemption for
institutional investors, however, this applies when the transaction is made
solely for the purposes of investment of 15% or less of the target’s
securities and the acquirer does not intend to participate in the management
of the target. Mr. Grannon also mentioned background safeguards
outside antitrust law, such as fiduciary obligations. He considered that
the theory on common ownership is getting ahead of the evidence of
anticompetitive effects. Antitrust agencies have not enforced competition
law in this area because there is no real evidence of anticompetitive harm
arising from common ownership by institutional investors.

EDWARD ROCK (Professor, NYU School of Law) considered that the
issue of whether existing antitrust laws are sufficient depends on the
definition of the competitive challenges associated with common ownership.
He stated that he does not find the econometric evidence or theoretical
arguments for the anticompetitive unilateral effects of common
ownership convincing. The crucial question to be dealt with by the DOJ
is whether common ownership worsens the competitive situation, taking
into account the fact that firms in concentrated markets have independent
incentives and preferences for soft competition. If the market structure
is anticompetitive, but common ownership does not worsen the situation,
there would be no basis for action against it. As regards the possible
“channels” by which common owners could influence management,
leading to increased prices, several channels have been proposed in the
literature: lobbying, compensation of management for maximizing industry
profits, or the so-called “lazy owner” channel. These suggestions are
controversial, each requires different, complicated mechanisms in order
to be effective, and would demand different enforcement responses.
According to Prof. Rock, potential coordinated effects should be more of
a concern, and are more likely, than unilateral effects in relation to common
ownership. The increasing concentration of shareholdings and communication between investors and firms could lead investors to play an
organizing role in facilitating conspiracies among portfolio companies.

Finally, Glen WEYL shared a proposal currently in discussion: no investor
who chooses to participate in corporate governance could have more than
1% ownership in several firms operating within an oligopoly. He emphasized
the importance of definitions to implement this structural remedy,
which he presented as relatively simple and easily monitored. Despite its
disruptive effect on the industry – it would reduce diversification by 5%
–, this solution would increase concentrated ownership and address
competition issues. While Nathan MILLER supported this proposal, which
he believed could help strengthening incentives for competition, Eric
GRANNON and Edward ROCK were more skeptical. Mr. Grannon remarked
that the US antitrust agencies have recently told the OECD that creating
an across-the-board restriction on common ownership without sufficient
evidence of anticompetitive effects could cause unintended costs on
business and consumers by making it more difficult to diversify risk.

PANEL 2

HEALTH SECTOR: TOO MANY MERGERS?

The second panel was chaired by SHERRY GLIED (Dean, NYU
Wagner) who introduced the discussions by pointing to the recent
shift in attention from concerns about the demand side of the
healthcare system to concerns about the supply side. She cited an influential
paper1 to question the functioning of the supply side with a view to
explaining the main differences between the US healthcare system and the
rest of the world, notably regarding the amounts paid for the same services.

MARTIN GAYNOR (Professor, Carnegie Mellon University) remarked
the tremendous amount of consolidation in the healthcare sector. In the past
years, consolidation has occurred regarding hospitals, health insurance and
other areas. It consisted of horizontal consolidation as well as vertical
acquisitions, such as the rapid acquisition of physician practices by hospitals
– one out of three doctors is employed by hospitals and 44% of primary
care services are in hospitals. The considerable number of mergers has
allowed the gathering of much information on both anticompetitive effects
and efficiencies. This data has confirmed that fewer potential competitors
are linked to price increases. Consolidation, notably among hospitals, also
leads to lower quality of care. Finally, innovation has been negatively impacted.

GEORGE ROZANSKI (Partner, Bates Whites) confirmed that the evidence
has shown the implementation of anticompetitive mergers in the past years.
One of the most complex questions in the health sector is defining the
geographical market. Hospitals compete on prices but especially on non-price factors, such as the quality of care. Patient flow data did not allow the
assessment of consumers’ response to changes: patients choose hospitals
because they are convenient for them – close to their residence – unless
they require special treatment. This means that patients do not travel in
response to small changes in price, but primarily because they have a need
for particular treatment. Consequently, patient flow data is not helpful in
determining which hospitals are close substitutes or understanding the
complications or likely effects of a merger.

BEAU BUFFIER (Chief, Antitrust Division – Office of the New York State
Attorney General) considered the overall number of mergers to be an
exogenous factor. He confirmed that the main focus is on the impact of
consumers. There have been major price increases following some mergers
in the health sector; however, theories of harm and market power are not
sufficient to explain all of them. Mr. Buffier mentioned the issue of crossmarket effects. While some merging parties claim that their operation
generate efficiencies, the DOJ is looking into new ways to investigate and
challenge mergers when necessary. Even in seemingly competitive markets
such as New York, concentration levels can be high. He also referred to the
phenomenon of “creeping acquisitions”, i.e. acquisitions of physician groups
over time which cannot necessarily be challenged but may increase concentration. Mr. Buffier confirmed that mergers should be apprehended differently across the health sector (labs, physician groups, hospitals, insurers etc.). While the activity used to be mainly horizontal consolidation, large transactions may combine for e.g. insurers with PBMs or retail pharmacy networks. Merging companies increasingly make efficiencies claims that they need these mergers in order to apply greater data analytics and have access to more complete medical records to provide better care.

During the following discussions, Martin GAYNOR cited the FTC decision on
the horizontal aspect of the St Luke’s/St Alphonsus merger (2017). He also
mentioned the sympathy of antitrust agencies towards the failing firm
defense in the health sector. He stressed the bargaining power of insurers
and the relatively low-price elasticity for insurers because medical prices
are too high without insurance. He stated that evidence shows health
insurance mergers provide surplus on the supply side which is not passed
on to consumers. Supporting this statement, George ROZANSKI remarked
that the main concern linked to consolidation on one side of the market is
the exercise of monopoly power by buyers. He discussed the public policy
issue of deciding to which side of the market surplus should be allocated,
because it could lead to innovation on the supply side – assuming such
benefits are passed on to the consumer, which is not certain – or direct
consumer welfare on the demand side.

As regards possible solutions to address the competitive and wider price
issues in the healthcare sector, Martin GAYNOR suggested price caps imposed
by States and other approaches such as arbitration. He emphasized the
importance of keeping barriers to entry as low as possible as once a company
acquires a dominant or monopoly position, it will naturally attempt to secure
it, for e.g. by imposing contractual clauses which could be questioned by
antitrust agencies or state health commissioners. Competition policy in this
sector and other sectors should be considered widely without depending
only on antitrust agencies, but also on other public agencies. From an
enforcement point of view, Beau BUFFIER specified that enforcers do not
have the power or the will to impose a de-concentration movement in the
health sector. However, exclusionary behavior and collusion – for e.g.
non-compete agreements which constitute barriers to entry or expansion
– constitute the main focus of antitrust law enforcers. Concerning vertical
mergers, the potential exclusionary vertical effects of vertical mergers are
one of the more recent issues. Mr. Buffier considered that the existing model
of health services in the US requires changes. He recognized the developing
movement towards experimentation, which involves interesting new types
of transactions. These mergers have a role to play in shaking up the state
of the market and controlling the run-away costs.

Lunch Keynote Speech

Jed Rakoff

JED RAKOFF (Judge, District Court for the Southern District of
New York) dedicated his speech to the relationship between
antitrust enforcement and income inequality, based on recent
studies and practical examples. The richest 1% of US households
have lire wealth than the entire remaining 90%. This high
concentration of wealth is an increasing problem: the average income
of the top 5% grew by 38% between 1990 and 2014, whereas the
average income of the other 95% grew by less than 10% during that
same period. Income inequality is becoming worse over time. Judge
Rakoff also referred to a recent article in the NY Times about the
shocking comparison between the pay of CEOs compared to that of
their employees. The most common reason listed for this phenomenon
is technology. The decrease in the number of employees in the US
(and unionization) is indeed steady and considerable. Reference is
also made to global competition against countries with lower paid
workforce. However, some European countries which have experienced
these same factors do not have such income inequality. In recent
years, some economists have concluded that another material factor
has been increased concentration, even oligopolization, among US
industries and businesses. Concentration allows business to charge
higher prices than they would on a competitive market – money is
taken out of consumers’ pockets to benefit shareholders and managers.
According to a 2018 study, half of all publicly listed companies have
disappeared over the last 40 years. Today only 20 firms account for
20% of the revenue in GDP. Shareholding has also evolved and is now
controlled by only a few companies. Antitrust enforcement by agencies
and judges could be used as a safeguard against such concentration
of wealth and power. However, US judges and the DOJ have shifted their focus in antitrust cases to narrower approaches. In 1966, the
US Supreme Court blocked a merger between two supermarket chains
in Los Angeles because the merging entity would have controlled
7.5% of the market, which was held to be a violation of Section 7 of
the Clayton Act. Such decision would never be rendered nowadays:
four grocers presently control over 50% of all grocery sales nation-wide,
and a much higher percentage in some communities. Many studies
have demonstrated that this concentration has been coupled with an
increase in food prices. Judge Rakoff also presented examples from
the healthcare sector – where it has been shown that hospitals almost
always increase their post-merger prices –, the airlines industry, and
banks – where the top 10 banks in the US now control over 50% of
all banking assets. In the pharmaceutical sector, there has been misuse
of patents otherwise legitimately obtained, for e.g. in pay-for-delay
situations. The DOJ had no objection to the Delta/North-West merger
in 2008 or the United Continental merger in 2010. Although antitrust
enforcement by the DOJ and the courts has remained aggressive in
the area of pure cartels, but not as regards mergers. The last merger
to have been litigated was in 1979. The shift in the courts’ attitude
was initiated by the Chicago Law and Economics School, which has
a narrow view of what constitutes an antitrust violation. The DOJ has
published a press release endorsing increased prosecution against
individuals, which is indeed an effective deterrent. However, Judge
Rakoff observed that there has not been any increase in antitrust
enforcement and that there is no likelihood of such increase in the
future. This serious problem leads to increased cost to consumers as
well as income inequality

PANEL 3

INNOVATION IN HIGH-TECH: IS ANTITRUST POLICY HELPING?

ROBERT SEAMANS (Professor, NYU Stern) chaired the third
panel centered on innovation in high-tech industries. He introduced
the main discussion topics: two-sided markets and
platforms, as well as patents and standards. He noted that many believe
that companies such as Facebook and Google are new kinds of monopolists.
In the past years, Google has been involved in over 100 acquisitions.
The impact of such developments

MICHAEL CRAGG (Chairman, The Brattle Group) explained that the
most important factor for platforms is virtuous feedback on at least one side
of the platform in order to generate a virtuous circle. There is a presumed
assumption that platforms can have market power because of this virtuous
circle because feedback effects create barriers to entry and reduce price
elasticity. The issue is whether market power is being misused. As regards
innovation, access to population is important, as shown by the Facebook/
WhatsApp merger which allowed Facebook to have access to more population. One of the concerns was that this could reduce innovation. The main issue is to determine whether there is a substitute ability between the
merging parties and whether there is a complementarity. If there is complementarity, their merger could lead to more efficient innovation and both merging parties could benefit from pooling their resources towards innovation. However, there could also be spill-over effects whereby competitors will take advantage of their innovation, without innovating themselves. Mr. Cragg noted that distribution is crucial to innovators: will their product or service be used and gain in value? Start-ups face these questions and rely on acquisitions for funding and motivating their investments. There seems to be an offset between the reality of funding new ventures and the consequences on competition in the long term.

JOHN HARKRIDER (Partner, Axinn) underlined the necessity for
enforcement agencies to be cautious towards innovative companies
to protect innovation. Instead of focusing on their profit, they should
assess their levels of innovation. There is a clear clash between old
systems and new disruptive models. In fact, most of the competitive
questions around Google, such as its conduct on the online advertising
market, come from its own evolution rather than acquisitions of other
businesses.

ROGER NOLL (Professor, Stanford University) considered that there
should be no generalization from the models of Google and Facebook.
The importance of data has increased in relation to innovation and
influencing consumer behavior. On the solutions to encourage innovation,
Mr. Noll emphasized the role of disruptive start-ups. The ability
to sell innovative ideas or software to established firms such as Google
or Facebook is crucial to motivate entrepreneurs. It should be considered
part of the capital market and it is, according to him, an efficient way
for big firms to maintain high levels of innovation.

KIRI GUPTA (Director, Economic Strategy, Qualcomm) mentioned
a real gap between the understanding of technology and the assessment
of mergers. European agencies, including the European Commission,
have taken on handling effects of mergers on innovation. An
“innovation theory of harm” is crystallizing in merger control, which
provides for prohibiting mergers which harm innovation significantly.
This theory of harm focuses on unilateral effects and generally argues
that all mergers are bad for innovation. However, Ms. Gupta argued
that the upstream market for innovation and the downstream product
market should be distinguished. This distinction allows to recognize that different sets of competitors can compete on these different
markets, for e.g. disruptive start-ups may compete only on the upstream
market for innovation. Without good understanding of the technology
in the relevant market, general theories are dangerous.

Responding to this argument, John HARKRIDER considered that
technology is not different from other products. Across all industries,
antitrust lawyers and enforcers need to learn about market functioning.
For Mr. Harkrider, distinguishing technology removes antitrust tools
and would be a mistake. He encouraged regulatory humility and thought
that the US was on the right track, trying not to have preconceived
ideas and to find market mechanisms to solve the identified problems.

As regards the competitive assessment of multi-sided platforms, Roger
NOLL explained that an effective competition analysis needs to consider
the various customer groups. He remarked that platforms have existed
for a long time, such as magazines or radio channels. Therefore, the
notion that entirely new antitrust perspectives are needed for online
platforms is wrong according to him. The main specificity is that, while
not ignoring the interactions between the various customer groups,
the competition analysis needs to start with the group which was
allegedly affected by the anticompetitive restraint. John HARKRIDER
agreed with this idea, stating that market power on multi-sided markets
should be assess by taking into account all sides, including when one
or several of them provide services for free. It is critically important to
look at both sides of a double-sided platform, because competition
may be high on quality if not price.

Robert SEAMANS then oriented the discussions to patents and standards,
particularly applied to the case of 5G (5th generation mobile networks).
This new generation of networks will enable devices such as cars and
smartphones to connect to each other. It represents great opportunities
as well as great challenges. New regulatory obstacles will have to be
addressed.

Kiri GUPTA predicted that existing challenges will become more important
due to 5G. The fight between business models will become more vigorous
and markets will become more polarized as the mobile communications
industry has high levels of investment in R&D. There will be more effort
to redefine FRANDs for the use of patents. Enforcers may impose more
obligations on companies: for e.g. in the EU commitments have been
imposed on licensors as well as licensees. These notions will have to be
clarified. Ms. Gupta also noted that the success of standards will come
from their attractiveness for hundreds of companies, while insisting on
the risk of them being held hostage of certain interest groups. Finally, she
emphasized that there will be a need for price differentiation.

Michael CRAGG considered that the issue with fast-evolving technology
markets is the difficulty to define general rules about optimal investment
without having knowledge of the components of the product. Given the
nature of the market, where feedback is extremely important in developing
a consumer base, attempts to develop the consumer base to the detriment
of antitrust rules should be anticipated. However, Mr. Cragg believed that
legal uncertainty would be a better solution than imposing regulatory
burdens without fully understanding the functioning of the market or the
future value of the product. He also evoked the policy question of allowing
access to 5G when it mostly relies on very short-range connectivity.

PANEL 4

MONOPOLIZATION & DOMINANCE: EU VS US?

SCOTT HEMPHILL (Professor, NYU School of Law) chaired
the fourth and final panel of the conference, focused on the
European and US approaches to monopolization and dominance.
Mr. Hemphill noted that this topic is a subject of ongoing debate. The
European Commission’s Google Shopping decision is being appealed
before the EU courts. Facebook faces scrutiny in Germany for its data
collection practices on third-party websites. Intel is in a long-running
battle in Europe over market-share rebates, following a similar battle in
the US. The purpose of the discussion was to present the views adopted
on both sides of the Atlantic. Mr. Hemphill also mentioned the concerns
expressed by some commentators on the topic of the intersection of
dominance and big data in the antitrust paradigm. On the Google Shopping
case, he commented that the FTC and the European Commission reached
starkly different conclusions about Google’s practices, in particular the
preferences and demotion practices.

RICHARD GILBERT (Professor, University of California) considered
that the Commission’s approach was more mechanical and consisted of
defining the market, assessing the dominant position and checking for
the criteria of abuse. In the US, the analysis focused on consumer harm:
if consumer harm is established, market definition comes later in the
analysis. There are other differences in the two systems relating to
regulatory and enforcement policies. EU law created an obligation for the
dominant firm to treat competitors as it treats itself. The Commission may
have been sensitive to the many complaints received against Google. In
the US, competition enforcers seem to be more concerned about false
positives. Mr. Gilbert also insisted on the fact that the market was dynamic,
which was not taken into account. He considered that the Commission’s
decision did not deal sufficiently with the question of harm to consumers.

CRISTINA CAFFARRA (Vice President & Head of European Competition
Practice, CRA) recognized that the Google Shopping decision had been
described as an example of the Commission’s “tech lash”. She considered
that there is a culture and history of protecting competitors rather than
the competitive process in the EU. However, she felt that the Google
Shopping case was a standard vertical foreclosure case. The Commissions
seeks to treat every case according to the model it established in the
Microsoft case – which was validated by the EU Courts. Ms. Caffarra
rejected the argument of a dynamic market: the investigators are able to
take into account changes of circumstances in the course of the investigation, which usually lasts for a long period. She recognized that the
Commission tends to define the market very narrowly in order to establish
leverage from one market onto another differentiated market – this narrow
market definition is unfortunate in her view.

JAMES TIERNEY (Partner, Orrick) also stressed that the difference
in the assessment of facts and the divergence in inferences lead to
different results. Google argued that it was trying to provide higher
quality results for users; the Commission found that it was an intentionally
rigged system. There is a higher burden on dominant firms not to
harm competitors, or even protect them, under EU law in comparison
with US law. The FTC decided not to bring a case against Google, possibly
because product market definition was complex. Mr. Tierney considered
that in the US it is not well perceived for public agencies to give directions
to companies or tell them how they should design their algorithms.
Therefore, US agencies are reluctant in this area. On the notion of
regulatory humility, Mr. Tierney emphasized the fact that remedies can
sometimes be worse than the harm: only when the agency has a good
remedy to implement can it intervene and invest resources. Google has
been fined by the Commission, but the remedies are still unclear, which
is inefficient in his opinion. On the argument of a dynamic market, he emphasized the fact that circumstances change over the course of the
investigation: for example, a new entrant – such as Amazon in the Google
Shopping case – can change the market situation very quickly. If the
harm disappears, an injunction would not be needed. In the EU, it would
still be possible to impose a fine, unlike in the US.

JOSHUA WRIGHT (Professor, Global Antitrust Institute at Scalia Law
School) underlined the US and EU enforcers’ different approaches to
the economics of competition law. The theories of harm are similar, but
the elements needed to substantiate the harm are very different. He
considered it was likely that the FTC would have lost a Section 2 case
against Google. The simplest explanation for the FTC’s decision not to
bring a case was that there was no competitive harm in their view. He
insisted on the importance of the role of economics in decision-making.
Unlike the FTC, the Commission did not focus on the effects of the
practices.

DOUGLAS MELAMED (Professor, Stanford Law School) was of the
view that the differences between the US and the EU were institutional
rather than legal. While the US system is decentralized, the EU system
is more condensed around the Commission which acts as enforcer,
prosecutor and decision-maker. According to him, judicial review is
ineffective because it is lengthy and by the time the EU Courts review
the decision, the fines have been paid and the conduct has stopped.
The EU system is therefore not well-suited for regulatory humility.

To continue the discussion, Scott HEMPHILL referred to the investigation
conducted by the German competition authority (the “BKA”) against
Facebook, the main issue being the use of antitrust tools to address big
data problems.

James TIERNEY found it regrettable that complainants can choose
between different jurisdictions, some of them – including Germany
and France – being more favorable than others. He asserted that
Facebook’s conduct would not be challenged by antitrust agencies
in the US as it concerns a privacy issue which is quite distinct from
antitrust. The BKA was concerned by Facebook’s acquisition of
WhatsApp, although it was authorized quickly in the US and without
condition in the EU as well. This case is an indicated that there are
important concerns around big data and firms such as Facebook. It
could mean that a dominant firm violating privacy laws would also
violation competition law.

Joshua WRIGHT highlighted the complementarities between antitrust
and consumer protection. However, in practice there is an enforcement
divide. There are also legal, cultural and constitutional obstacles to
the integration of merger control and consumer protection, but the
demand for this evolution is rising.

Douglas MELAMED also stressed that when consumer protection and
competition become too intertwined, competition could start being
used for purposes which it was not designed to serve, such as data
protection – as the Facebook case in Germany demonstrates.

Finally, Cristina CAFFARRA emphasized the good reaction to the
decision of the BKA in Europe. The Commission has encouraged the
German agency to carry out its investigation, and the French competition
authority is looking into similar practices. Ms. Caffarra insisted
on the sense of crisis regarding data protection. Competition law
should be used to address these important issues if there is a lack
of better tools.

Closing Keynote Speech

Noah Joshua Phillips

NOAH PHILLIPS (Commissioner, US Federal Trade Commission)
spoke about the issue of common ownership and gave his
perspective on the related theories of harm identified in
literature. He observed that the discussion about the antitrust
implications of common ownership by institutional investors has
moved very quickly as recent research has focused on its price effect
and potential antitrust harm. Dramatic policy proposals followed and
involved considerable impact on the market structure. In 2017 the
OECD and European antitrust enforcers began putting common
ownership theory in practice. In contrast, the US antitrust agencies
have stated that they are not prepared to make any changes to their
policies with respect to common ownership due to the lack of evidence
of actual harm. According to Mr. Phillips, it is crucial to better understand
the economic reality and make sound policy decisions. Further
research concerning more sectors will be important to understand
the effects of common ownership across the entire economy. So far
scholars have identified no clear mechanism by which common
ownership could cause lessening of competition or anticompetitive
harm. The appearance remains unsettled. The fundamental claim
underlying the common ownership debate is that managers, being
conscious that large institutional shareholders also hold stock in
competitors, will soften competition to benefit those shareholders.

However, this theory is rather non-intuitive and contradicts ancient
and well-established concerns on the relationship between managers
and shareholders, highlighted by Adam Smith in The Wealth of Nations
and based on the assumption that managers do not tend to represent
individual shareholders’ interests as devotedly as their own interests.
Mr. Phillips was not convinced by the theory that managers would
favor minority shareholders without further incentive. He also referred
to recent research showing that institutional investors may in fact
push executive compensation further away from industry performance.
He also emphasized the fact that minority investors have been criticized
for being too passive – not for exercising too much control over the
managers. Experience runs counter to the theories of harm identified
by some scholars in relation to common ownership. Mr. Phillips spoke
about the potential consumer benefits offered by institutional investors:
they allow millions of individuals to diversify their investments while
limiting risks. Finally, he considered that dispersing shareholdings
reduces ability and incentive to exercise control, which could include
pressuring the firm to compete more aggressively. For all these reasons,
Mr. Phillips agreed with the assessment by the US agencies and did
not consider that there was sufficient ground for policy or enforcement
changes with respect to common ownership.